Govt aiming to run closed PEs without concrete plans

Published On: June 1, 2022 03:58 PM NPT By: Dilip Poudel

KATHMANDU, June 1: The Government of Nepal has announced plans to reoperate the public enterprises (PEs) which remain shut for an extended period of time without doing any homework. While most of the government-owned industries are at a loss, Finance Minister Janardan Sharma announced plans to resume the operation of nine closed industries while presenting the budget for the Fiscal Year 2022/23.

Although the Ministry of Industry, Commerce and Supplies claims to have done some research, no concrete plan has been made for the operation of the industry. The government has made announcements to resume Janakpur Cigarette Factory, Agricultural Tools Factory, Gorakhkali Rubber Industry, Orient Magnesite, Nepal Metal Company, Biratnagar Jute Mill, Birgunj Sugar Factory, Hetauda Textile Industry and Butwal Yarn Factory, without any proper planning. “Some industries may resume their operations if the responsibility is handed over to the private sector,” stakeholders say.

Although the Ministry of Industry, Commerce and Supplies has submitted a report after conducting a general study, the manners in which the industries would be resumed are yet to be decided. An official of the Ministry of Finance said that while the government has proposed to operate the industries, the plan is unlikely to come to implementation. "There is no concrete plan to run these closed industries," the official said.

The annual report of the enterprises made public by the ministry mentions that the government will only invest in enterprises that have financial potential based on their business plans.

Baburam Gautam, chief of the Corporation Division at the Ministry of Industry, Commerce and Supplies, said that he was not sure about the modality of operating the closed public enterprises and factories. "The privatization committee will decide what to do," Gautam said. He said that the government will experience a big challenge in bringing the closed industries to operation.

However, problems and disputes have not been resolved for a long time even in the privatized institutions. The government has invested around Rs 567 billion in state-owned enterprises (SOEs). Although the investment has been increasing every year, these SOEs have not been able to give satisfactory returns. Currently, 19 existing industries and corporations are running at a loss.

It is mentioned in the budget that the need and the economic and financial rationale for resuming the enterprises will be analyzed and based on the current status of the enterprises, they will be operated, restructured, disinvested or closed down by the government. As there is no clear action plan on what to do, there still remains confusion over the topic of operating the closed industries.

The government has also decided to formulate and implement a special action plan to introduce reforms to Nepal Electricity Authority, Civil Aviation Authority of Nepal and Nepal Telecom.

It has also been decided to make necessary arrangements to operate the state-owned cement industries to their full export potential. It is mentioned in the budget that the institutions will be restructured to operate in accordance with modern managerial norms so as to facilitate the supply of essential goods and services and to strengthen the presence of the state in areas of strategic importance.

It has been stated that the structure of the enterprises will be changed by introducing business reforms and strategic partners that would strengthen their governance and financial capacity. 

It is mentioned in the budget that garments produced by the Hetauda textile industry would be used in public offices, but it is not decided whether the closed Hetauda industry will be resumed or. Repeated attempts to run this textile industry in the past have not been successful.

The government has stated that it will restructure the public enterprises operating in the fields of agriculture, food, dairy, pharmaceutical and transportation and give ownership to the federal, provincial and local governments.

While private sector dairies are making good profits, the Dairy Development Corporation (DDC) is at a loss. Hetauda Cement and Udaipur Cement are also at a loss as the private cement enterprises are issuing Initial Public Offerings (IPOs), transforming them into public companies with high profits. 

Similarly, Nepal Aushadhi Limited, Nepal Orient, Butwal Yarn Factory, Food Management and Trade Company, Nepal Oil Corporation, Nepal Ban Nigam Ltd, Nepal Airlines Corporation, Infrastructure Construction Company, Cultural Corporation, Gorkhapatra, Nepal Television, and Nepal Railway Company are also at a loss. Losses incurred by such state-owned companies have increased the liabilities of the government. The net profit from the 22 existing state-owned companies has decreased by 40.30 per cent over the years.

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